A Stable Market Prepares for 2010: At this time last year, the reinsurance market was vastly different. A financial catastrophe and major hurricane occurred and changed the way (re)insurers viewed risk. As both events receded, our industry was left with profound uncertainty. More than being concerned about the direction of reinsurance rates at the January 1, 2009 renewal, carriers worried that a widespread capital shortage was imminent, impairing their abilities to assume and transfer risk. Despite the severity of the financial and natural catastrophes the reinsurance market proceeded in an orderly fashion, with property-catastrophe rates up 10 percent to 15 percent on average and other segments not significantly impacted.

Strategy Should Drive Solvency II Compliance: Lately, discussion about the use of capital models in Europe has been driven by Solvency II. A major regulation is on the horizon and is progressively introducing considerable change in the how the insurance industry will manage risk. Important investment has already begun and will continue, as companies have to integrate this new regulatory regime in their management approaches. With Solvency II compliance driving the adoption of economic capital models, though, many (re)insurers could miss an opportunity to secure a competitive advantage. Instead of using compliance as the impetus for capital modeling, strategy should come first.

Environmental Insurance in Asia — A Profound Opportunity: The environmental liability insurance market in Asia is poised for growth. Limited resources support a large and rapidly growing population, which has resulted in a considerable environmental toll. In China and Japan in particular, the effects of pollution are potent and proliferating. Some legal measures are emerging in an effort to reduce behaviors that cause environmental damage. With the establishment of liability, there is a salient role for (re)insurers in these markets. Despite challenges around data availability and a small existing market for environmental liability insurance, the long-term opportunity is profound, especially for early market entrants.